Canada Oil And Gas Pipelines The Focus Of Heated Battles In 2011 -- And They're Not Over

CALGARY - Jackie Thomas says she'd stand in front of a bulldozer to stop the proposed Northern Gateway oil pipeline from being built across B.C. to the Pacific Coast.

"I would lay down my life for this," says the chief of the Saik'uz First Nation, near Vanderhoof, B.C.

"This is my grandchildren's water we're talking about."

Thomas and other critics helped raise the heat this year on major Canadian energy companies proposing big oil pipeline projects in Canada and the United States.

The pipelines are being drawn up to carry rising oilsands output from northern Alberta to U.S. and Asian markets over the next decade — with the promise of thousands of new jobs, fatter tax revenues for governments and an economic shot in the arm for both countries.

But opponents worry about the environment, potential oil spills in their communities and rising greenhouse gases caused by pumping more "dirty oil" out of Alberta's oilsands.

The two most prominent targets have been Northern Gateway, a $5.5-billion proposal to ship Canadian crude to Canada's West Coast for export, and Keystone XL, a US$7-billion expansion to an existing system that would connect Alberta oil to Texas — the centre of the U.S. gasoline refining industry.

Heading into 2012, regulatory decisions on both proposals are at least a year behind schedule, though their respective backers — Enbridge Inc. (TSX:ENB) and TransCanada Corp. (TSX:TRP) — remain confident their projects will go ahead.

In a lagging economy, the jobs and tax revenue that would result from the projects are sorely needed, supporters say, and in a conflict-ridden world, it makes sense for friendly, democratic Canada to be a major oil supplier.

As recently as September, approval of Keystone XL was thought to be a "no-brainer," in Prime Minister Stephen Harper's words. By November, however, things had shifted.

The U.S. State Department, tasked with deciding on Keystone XL because it would cross an international border, was set to rule by late 2011, but pushed its final decision out by at least a year. It said more time was needed to weigh a new route for the pipeline through Nebraska to avoid the ecologically sensitive Sandhills region and part of the Ogallala aquifer, a key drinking water source for eight states.

TransCanada agreed to work with state legislators on a new route. It has said that deal could mean a faster timeline for approval — six to nine months instead of 12 to 18 — though the State Department hasn't budged its schedule.

Some have suggested the delay had less to do with environmental concerns — the State Department had deemed Keystone XL safe in a series of earlier environmental assessments — and more to do with politicking ahead of the 2012 presidential election.

"It's pretty widely recognized that in the run-up to any presidential election, there's a lot of political pressure and a lot of decisions are made or postponed for short-term political reasons, but not for long-term good policy reasons," says Alberta Energy Minister Ted Morton, who said he's optimistic Keystone XL will come to fruition.

Brenda Kenny, head of the Canadian Energy Pipeline Association, agrees there's every reason to believe Keystone XL will be built.

"The uncertainty and the degree to which any given project can become a lightening rod has been a key learning in 2011," she says.

One debate that seemed to pop up time and again throughout 2011 was over whether oilsands crude is more corrosive than other types, making the pipelines that carry them inherently less safe.

"That sort of assertion can get a little sticky, and even though it's completely false, it kept coming up," Kenny says.

She likens the tactics of big environmental non-governmental organizations to those of Lee Atwater, the ruthless Republican strategist of 1980s "who decided that innuendo trumps fact and that public fear trumps public interest."

Atwater died 20 years ago but was well-known earlier for advising Republican presidents Ronald Reagan and George H.W. Bush and running hard-edged campaigns based on emotional wedge issues.

The other side sees it much differently.

American author and environmentalist Bill McKibben was one of some 1,200 people to be arrested at anti-Keystone XL protests outside the White House over the summer.

"People used their bodies to ante up for this poker game, and we played it as hard as we could," he says. Others slapped with handcuffs included actresses Daryl Hannah and Margot Kidder.

McKibben says he was compelled to action around mid-year when he heard NASA scientist James Hansen say approval of the pipeline — and the oilsands development it would enable — would mean "game over" on the climate change front.

"I think the thing to understand was we should have paid attention long before... We were just sort of Johnny-come-latelies to this and it was about our understanding of the climate implications," he said.

Morton draws a distinction between the local protesters in Nebraska and those with big environmental groups that organized the Washington protests.

"I think most of the people in Nebraska were interested in a better pipeline, one that avoided the Sandhills because of its environmental sensitivity. So I think going forward, there's room for dialogue and policy advance with the people that are looking for better, safer pipeline routes and pipeline options," he said.

"But there's a group out there that are opposed to any expansion of the Western Canadian oilsands and obviously their strategy now is to try to block access to markets."

Many of those same anti-Keystone activists, he said, have since shifted their focus to B.C., and the battle over Northern Gateway.

Northern Gateway is a twin pipeline system that would carry Alberta crude to the West Coast for export and carry imported condensates, used to dilute bitumen, inland.

It's billed as a market-opening project of broad national interest, enabling more Canadian barrels of oil to move by tanker to lucrative Asian markets, helping Alberta producers get a better price for the crude they produce.

U.S. pipeline giant Kinder Morgan is also planning an expansion to its Trans Mountain line, through which some Canadian crude can currently access the Pacific.

CEPA's Kenny said the lack of pipeline market access costs the Canadian economy $14 billion every year, due to the higher prices fetched by international crudes over landlocked North American varieties that face a supply glut.

"Best value for the product you have is something we practise in wheat, in lumber, in uranium and this is no different," she says.

"Looking for best value is just a smart thing to do. It builds hospitals and it reduces taxes."

No sooner had Keystone XL been delayed than pipeline proponents pushed harder for a West Coast option. If the U.S. doesn't want our oil, the argument goes, China will gladly take it.

Queen's University public policy professor Warren Mabee calls that stance a "pipe dream."

"It's the sort of things we say to the Americans when the Americans are dilly-dallying around buying our resource, that we can just sell it somewhere else."

Indeed, Northern Gateway won't be a cakewalk. First Nations opposition is formidable, with 130 groups saying no to the pipeline. Some 4,300 people are set to speak at regulatory hearings that begin in early 2012; the sheer volume of participants has added a year to the review schedule.

Enbridge has offered a 10 per cent equity stake in Northern Gateway to dozens of aboriginal groups in Alberta and B.C., and says support has been strong and negotiations have been going well.

When one hereditary chief of the Gitxsan First Nation announced earlier this month he had signed a deal with Enbridge on behalf of his people, a backlash from within his community promptly erupted.

Over the past week there have been protests outside of the Gitxsan treaty office in Hazelton, B.C. demanding Chief Elmer Derrick resign.

While it's often portrayed as such, opposition to Northern Gateway isn't just a First Nations issue, Mabee noted. Many B.C. residents worry about increased tanker traffic along the coast, and won't be silent about it.

"If B.C. gets their bee in a bonnet, they'll push back," said Mabee, pointing to harmonized sales tax as an issue that spurred British Columbians to action.

More generally, Mabee said he's not surprised pipeline proposals became such a rallying point for Canadians and Americans this year.

"This is one of the few times that the public actually gets to talk about how the energy future will develop, because for the most part, decisions about what technologies to pursue or how they'll be rolled out — it's just not in the public arena," he said.

"This was in the public arena and people had the opportunities to engage, and so they did."